Exclusive: UK HealthCare to acquire another Eastern Kentucky Hospital System

University of Kentucky HealthCare is expanding its reach in Eastern Kentucky.

The UK Board of Trustees is expected to approve the acquisition of St. Claire HealthCare Friday. The hospital system in Morehead will add 139 licensed beds to the UK HealthCare hospital system.

The deal is expected to close July 1, officials said.

“We have the opportunity here to transform the people that we serve. We’ve traditionally been a safety net provider - we serve some of the most impoverished counties, not only in Appalachia but in the country,” St. Claire HealthCare President and CEO Don Lloyd said.

“The university has always been there, helping us educate the next generation of providers to serve those populations through various educational programs.”

UK HealthCare will take control of St. Claire through a member substitution agreement. St. Claire and UK entered into formal negotiations nine months ago.

Lloyd said rural healthcare systems across the nation have seen financial challenges and workforce issues. Demonstrating the workforce issues Kentucky healthcare faces, Co-Executive Vice President for Health Affairs Eric Monday said UK has to hire 5,000 more employees by 2031 to keep up with patient demand.

“We’re kind of the last of the Mohicans. There’s very few independent health systems left in the commonwealth and if you look at what has happened to healthcare - in particular rural healthcare - across the country, it’s being devastated in various areas,” Lloyd said.

“We’re very fortunate, because of the university, to not be in that situation.”

UK HealthCare in Eastern Kentucky

The proposed acquisition will preserve an “asset” of Eastern Kentucky, Lloyd said, citing St. Claire’s 1.25 million patient encounters last fiscal year.

That’s not the number of patients seen each year, but the total number of visits the hospital reported.

With 54 of Kentucky’s 120 counties in Appalachia, Monday said improving access is the only way to address significant health disparities in the region.

“If a patient can stay closer to home and get their care, their outcomes are better,” he said.

St. Claire sits about 65 miles east of Lexington. Drive another 60 miles east of that, to Ashland, and you will find another hospital system acquired by UK in 2022, King’s Daughters Health System.

Lloyd said the success UK demonstrated with the acquisition of King’s Daughter’s shows UK’s investment in Morehead will bring economic growth and healthcare workforce expansion. Through partnership with UK, King’s Daughters was able to employ about 500 people who had lost their jobs following the closure of another hospital in the Ashland area, at the beginning of the COVID pandemic.

“If you look at the economic impact of what has happened in the previous demonstration and the investments that the university has made (in Ashland), and you replicate that impact in our community and those areas that we serve, it’s absolutely transformative,” Lloyd said.

For the nine months of fiscal year 2023 that King’s Daughters operated as part of UK, the hospital generated a net revenue of over $46 million. That’s more revenue than the hospital generated in 12 months for the fiscal year 2021 acting as its own entity.

UK gets access to more patients

Robert Edwards, UK HealthCare’s chief strategy and growth officer, said UK does not pursue the acquisition of community hospitals as a growth strategy, but it does answer calls when there is a real need.

“When we talk about Kenutckians not having to leave the state, that means we have to have programs for (solid) organ transplant, bone marrow transplant, CAR-T cell therapies and oncology,” Edwards said.

“To support those types of programs … you have to cover big populations in order to feed our sub-specialty practices. We have partnerships across the state of Kentucky and beyond the borders.”

Acquiring St. Claire HealthCare will give UK practitioners and students access to more patients with different needs than the metropolitan population of Lexington, officials said.